We Are One Illinois Coalition files suit to overturn “pension theft” law

The union coalition We Are One Illinois and a group of active and retired public employees filed suit today in Sangamon County Circuit Court to overturn pension-slashing Senate Bill 1 (Public Act 98-599). Defendants in the suit are Governor Pat Quinn, other constitutional officers, the state retirement systems and their boards.

“Our suit makes clear that pension theft is not only unfair, it’s clearly unconstitutional,” said Illinois AFL-CIO President Michael T. Carrigan. “Teachers, nurses, emergency responders, and other workers and retirees will not stand by while politicians try to take away their life savings illegally. The legislature and governor shirked their responsibility to uphold the constitution, so we are seeking justice in court to right their wrongs. Promises must be kept, and the rule of law must prevail over politics.”

We Are One Illinois Coalition members include the Illinois AFL-CIO; Illinois Federation of Teachers; Illinois Education Association; American Federation of State, County and Municipal Employees (AFSCME) Council 31; Service Employees International Union (SEIU) Local 73; Illinois Fraternal Order of Police State Lodge; Illinois Police Benevolent and Protective Association; Associated Fire Fighters of Illinois; Illinois Nurses Association; Laborers’ International Union of North America Local 2002; Teamsters Local 700; and Teamsters Joint Council 25.

SUMMARY

The We Are One Illinois lawsuit argues that the “pension theft” law violates the pension clause of the Illinois Constitution, which unequivocally states that a public employee’s pension is a contract that the state cannot diminish or impair.

Public employees and retirees “have upheld their end of that constitutionally-protected bargain,” the suit argues. It continues:

“Those Plaintiffs who are current employees teach our children, care for the sick and disabled, protect us from harm and perform myriad other essential services for Illinois and its citizens. Those Plaintiffs who already have retired similarly dedicated their careers to the men, women and children of Illinois. And, each faithfully has contributed to his or her respective pension system the substantial portion of their paychecks the Illinois pension code requires.

“Unfortunately, the same cannot be said of the State. The State chose to forgo funding its pension systems in amounts the State now claims were needed to fully meet the State’s annuity obligations. Now, the State expects the members of those systems to carry on their backs the burden of curing the State’s longstanding misconduct. Specifically, Public Act 98-0599 unlawfully strips from public servants pension amounts to which they otherwise are entitled as a matter of law, let alone fundamental fairness.

“That is the very threat against which the Pension Clause protects.

“The Governor and the members of the General Assembly took an oath to uphold the Constitution. They acknowledge that other options exist to remedy the State’s knowing failure to adequately fund the State’s pension systems. But rather than work to remedy the impact of the State’s conduct in a manner that comports with their oath, complies with the Illinois Constitution and upholds the State’s constitutional promise to pension system members, the Governor and General Assembly unlawfully look the other way.

“Plaintiffs thus turn to this Court for protection and commence this action to defend their constitutionally-protected rights and protect the pensions they have earned. Plaintiffs request that the Court declare Public Act 98-0599, in its entirety, unconstitutional, void and unenforceable.”

CLASS ACTION

The coalition’s filing seeks to certify a class action representing all individuals, active or retired, who first contributed to the State Employees Retirement System, the State Universities Retirement System, or the Teachers Retirement System before January 1, 2011.

The suit’s 25 named plaintiffs representing the class are:

Lee Ayers of Chicago, a clinical lab technician at a university medical center for approximately 25 years;
David Behymer of Rushville, a retired teacher who taught art to children ranging from pre-school to high school for 30 years;
Christine Bondi of Ontarioville, who has worked for the Illinois Secretary of State for approximately 28 years as a public service representative and administering driving tests;
Monica Butts of Westville, a cashier with the Secretary of State for more than 12 years;
Gary Ciaccio of Kankakee, who for 33 years has worked for the Illinois Department of Human Services, caring for people with mental health issues or developmental disabilities;
Edward Corrigan of Pontiac, who retired after approximately 20 years as a correctional officer at an Illinois prison;
Michael Day of O’Fallon, a high school history teacher for 20 years;
Kenneth Dugan of Pesotum, an Air Force veteran and former state trooper who retired after serving nearly 30 years as a firefighter for the University of Illinois at Urbana-Champaign fire department;
Jennifer Edwards of Chicago, who retired after approximately 30 years in various positions at the University of Illinois at Chicago, including assistants to the History Department chairperson and the head of the Department of Pediatrics;
Elaine Ferguson of Nauvoo, a retired teacher who taught kindergarten and first grade for more than 30 years;
Denise Funfsinn of Mendota, a special education teacher for 29 years;
Terri Gifford of Springfield, a health and physical education teacher for approximately 30 years;
Gwendolyn Harrison of Springfield, who has helped citizens find information for 14 years as a librarian for the Illinois Secretary of State;
James Herrington of Fairview Heights, a high school and college math teacher for 35 years;
Marlene Koerner of Herrin, a retiree who taught for more than 30 years;
Gary Kroeschel of Chatham, who has served as an information systems analyst for approximately 14 years;
Ellen Larrimore of Chicago, a library specialist for the past seven years at Northern Illinois University;
J. Todd Louden of Good Hope, who for nearly 30 years served in the Western Illinois University police force;
Stephen Mittons of Sun River Terrace, who is a child protection investigator and has worked for the Illinois Department of Children and Family Services for approximately 19 years;
Jose Prado of Willowbrook, who has worked as a correctional officer and sergeant in an Illinois state prison for 15 years;
James Sheridan of DeKalb, who has served as a maintenance worker at Northern Illinois University for 13 years;
Thomas Tate of Salem, a nurse who for 34 years has served in the Illinois Department of Human Services caring for individuals with developmental disabilities;
D’Ann Urish of Springfield, a special education teacher who has spent 31 years educating middle school students with behavioral and learning disorders;
Caryl Wadley-Foy of Bradley, who retired after 32 years as a secretary in a state residential facility for individuals with developmental disabilities; and
Julie Young of Owaneco, an 11-year employee of the Secretary of State.

VENUE

The suit was filed today (Tuesday, Jan. 28) in the Circuit Court for the Seventh Judicial Circuit, Sangamon County, Springfield, Illinois. Sangamon is home to thousands of class members, as well as the state capitol and offices of the statewide officeholders and retirement systems named as defendants. Two of the three previously filed suits on this subject matter have been filed in Sangamon County as well.

STAY OF IMPLEMENTATION

In order to prevent irreparable harm to public employees and retirees who face immediate and irrevocable life decisions, and to avert unduly burdensome administrative complications for the state retirement systems, We Are One Illinois strongly believes that the pension-cutting law must not be implemented before its constitutionality is decided in court.

Consequently, the union coalition has sought for the past several weeks to reach agreement with the state Attorney General and the named defendants on a joint request to the court to enjoin the law’s implementation. Regrettably, the Attorney General refused. In its filing, We Are One Illinois reserves the right to seek an injunction.

Has there ever been an incidence of a major political group endorsing a statewide (or otherwise prominent)elected official for the upcoming election AND filing a lawsuit against that individual? In the same month, no less? This has to be a first. Pat Quinn, one of a kind.

The next Administration and next seated GA will be dictated to by this lawsuit and it going through the System. As we all watch this, remember, many, many here, me included, knew the end game is when the Supremes decide, but they needed the vehicle for the Supremes to give a sharper blueprint.

With the legislator forcing their view of consideration on employees, present and former, it should be noted that that has to be a meeting of the minds to create an enforcible contract. That mutual agreement hasn’t happened in this instance.

More lawsuits are coming. The State Universities Annuitants Association is one, I believe. I still have a question that I’m not sure was answered before. The lawsuits seem to be focusing on the constitutionality issue, and not the unilateral abrogation of a contract. If that is the case, can a contract issue be raised at some future point, or should that be included in these lawsuits too?

I just dropped in for a couple of minutes between appointments. Haven’t and don’t expect to have time to read it in the next several days. Since We Are One had the opportunity to read the other suits, I expect this is similar. It is case 2014CH00048 which is not real easy to read on the copy Rich linked to. I also expect all the cases to be consolidated into one once the courts feel the various expected parties have filed.

For the record, I’m not a party to this suit either although I do slightly know one of the named plaintiffs.

I think the Attorney General should be Quinns lawyer in these suits. She is paid by the taxpayers to represent the state in matters such at these. No they will hire attorneys to defend this at huge costs to the people.

The Complaint does a very good job of outlining (1) the historical facts to show that state leaders failed to contribute the amounts needed to fulfill the pension promise that they made EVERY YEAR that they did not reform the pension codep; and (2) the specific harm that the pension-reform bill is causing to the specific plaintiffs. The Complaint also does a much better job than the Complaint filed by the Devito law firm, especially by raising an argument based on the unconstitutitional “taking” of property.

On the other hand, the Complaint neglects to raise other facts and legal arguments that might prove persuasive to the Courts.

For example, the Complaint does not show that rather than match an employee’s pension contribution as required, state leaders diverted those monies to other parties, including Wall Street underwriters, investors, bond lawyers, road and bridge builders, multi-nationals who get tax breaks, and bankers who pay no tax on their services.

The Complaint also doesn’t show that for many many years, public employees and pensioners lobbied and urged the state to contribute moneys as promised and as needed, but their cries fell on deaf ears.

Nor does it show that the state, through its courts (i.e., the McNamee decision), assured public employees and pensioners that they NEVER HAD TO WORRY about the funding level of public pensions.

These easily-proven facts, if included in the Complaint, would have supported additional equitable and legal reasons for the Courts to toss out the pension-reform legislation.

For example, the entire pension-reform narrative could be re-presented to show that the state is now trying to bail itself out not simply by “taking” property, but by “taking” it from a limited number of precisely identified people. In other words: “The state is punishing ONLY US for the its profligate and irresponsible spending in the past.” To appreciate the potential of this argument, imagine that the State passed a tax surcharge on the upper 3% to bail itself out of the pension mess. If that were to happen, people would immediately see that such an approach runs counters to such constitutional principles as special legislation and bills of attainder. Similar issues arise when you take property from pensioners, and only pensioners, to pay the price of the State’s repeated diversion of pension contributions in the past.

In addition, the state’s historical malfeasance supports the charge that the state does not have “clean hands” in this matter — another equitable principle that could help the plaintiffs.

Finally, the Complaint also neglects to raise an argument against the state based on promissory estoppel - a quasi-contractual and equitable principle that weights in the plaintiffs’ favor.

It’s possible that the Courts would prefer to toss this monstrosity out through means other than the pension clause. Giving judges many equitable and legal arguments is always a good strategy. So it’s disappointing that these strategies weren’t included in the Complaint.

On the other hand, in terms of showing precise and calculated harm to the named plaintiffs, this Complaint is exceptional.

Chicago Publius, I appreciate your detailed review, but since you point out that several arguments were left out, can they be raised at a later point? And it would be nice, if someone could ask the lawyers that filed these lawsuits why, as Pensioner @12:17 asks, they didn’t throw everything in and see what sticks?

Thanks Kerfuffle. The question is, if they don’t amend the lawsuit, and this is made a class-action, can anyone bring those not included points up later, or are they precluded from ever being considered?

==If that is the case, can a contract issue be raised at some future point, or should that be included in these lawsuits too?==

It could be litigated, and probably should be included in all lawsuits. I know of a case where the Oregon Supreme Court held that that repealing a statute granting retirees a benefit was not an unconstitutional statute impairing a contract, but was only a breach of the contract. The distinction is lost on me (and was lost on a dissenting justice) because I would expect the damages for the breach would be the same as giving the retirees their full pension rights, but if it happened there, it could happen here, too.

Looking at the parties, GARS is not one of them. I was then hoping that if We Are One prevailed, the changes to GARS would stay in place until a GARS member filed suit. However, the lawsuit asks for all of the PA to be declared unconstitutional and void. However, the court may rule just portions of it unconstitutional (as there are smaller parts in the law which should be constitutional). If this is the case, the changes to GARS would not be struck down until a GARS member files suit.

Also, if the court does issue a preliminary injunction, I imagine they can only issue it to parties to the case. As GARS is not a party to any of the suits, they will continue to implement the bill. Again, until a GARS member files suit.

Since no one’s pension is actually going to be cut by the enacted reforms, but will only grow more slowly than they would have because of the reduced COLA, I wonder if the courts might rule that they have not actually been diminished i.e. made smaller. It is a cut in a potential not a current value. Not a very popular position I am sure, but one that could save the state if the courts see value in doing so.

Lawyer here. Many of the arguments discussed above may be of moral and political import but do not pertain to the narrow legal question of whether the statute violates the Illinois constitution. If anything, the complaint is already junked up with lots of superfluous allegations intended for the press release and not for consideration by the courts. Bottom line: it gets the job done.

Catrike - I am going to be taking a huge cut in my pension due to the fact that I my pensionable salary is above the pensionable cap and I am 3 years from retirement. You cannot say that nobody’s pension will be actually cut. And - if you think that I shouldn’t be making above the cap anyway, please remember that I have been paying 9% of it to my pension fund. I’m sure I’ll never see money come back to me because of my lower pensionable salary now…

@Catrike: “no one’s pension is actually going to be cut by the enacted reforms, but will only grow more slowly than they would have because of the reduced COLA”

Cut relative to what? what they received last year? why is that the standard, rather than what they would have received if PA 98-0599 had not been passed? The Pension Clause in the constitution says that the *benefits* of membership in a state retirement system shall not be diminished or impaired. Surely the 3% AAI (aka COLA) was one of those benefits, and surely the PA diminishes or impairs it.

Your present salary(presumably June 1st 2013-May 31st 2014) is grandfathered through, so unless you are expecting very large salary increases the cap on pensionably salary will make only a small difference to your pension. For people in similarly high-paying positions who are years away from retirement, however, it will make a large difference. (For people earning less than the pensionable cap, it makes no difference, of course. That cap does go up, but only by half the rate of inflation, so it will affect more and more people as time goes by.)

UIC Guy - I was (am) expecting salary increases my last 3 years, which most districts in the suburbs give to their retiring employees. Since I have planned for my retirement accordingly, this law blows a huge hole in these plans…

What do you say to the folks who are younger and will have to put more time into working for the state before they can retire and begin to receive a pension. Delaying a retirement age may not seem to be a diminishment until you consider that the lose the year or 2 of pension income up front. That isn’t a slow down in any increases - that is an outright loss.

And, catrike, since the constitution protects the benefits of the pension from being diminished, and not just the nominal amount of the pension payment itself from being diminished, the 3% compounded AAI cannot be diminished either, but nice try. The sooner the state corrects it structurally inadequate revenue stream, hopefully with the CTBA’s suggested progressive income tax that actually lowers the income tax burden for 94% of Illinois taxpayers, the better off illinois will be in paying its bills, meeting its obligations and helping the workers of this state prosper.

I am an active teacher who recently gave a four year notice to retire in 2018 to receive a compounded 6 percent raise yearly. This would have added about 10K onto my salary multiplier that is already over the new salary limit. The total money difference list to me between my original pension as stated by TRS and the new pension law is over 1 million dollars between my ages of 60 to 85 years old. I would say my pension got reduced, and I hope the Supremes decide in my favor. In addition, my pension might be reduced even more if I lose my two years of unused pay if I retire in 2018 under the new pension law. Does anyone know more details of the two years of unused sick pay with the new pension law?

I think those who are in the retirement “pipeline” (those who have signed their intent to retire) are grandfathered in as far as the cap goes. I also think those who retire or plan to retire under the scope of a current contract are also grandfathered in as far as the cap goes. I think you still will be able to reap 75% of the last four years average. Am I correct in this assumption?

Bobbysox-if someone is retiring during the term of a contract, that is the “pipeline.” Right? I think you basically said the same thing I did. Let’s say they retire in 2015 and the contract runs through 2018-they are ‘pipelined.” Correct?

From the IEA fact sheet in regards to SB1 “However, for any member covered by an individual contract or collective bargaining agreement, the cap will be the members annualized salary (if it is higher than the Tier II cap) on the day the current contract EXPIRES. A contract cannot be amended or extended to increase the level of the cap.” I would think this would cover someone who has given notice to retire under a current contract or one that expires within the future few years. Correct?

TRS informed me that the cap that is grandfathered in is based on when your school districts CBA expires. For example, say your CBA expires at the end of 2016, if 2016, was your highest salary and you’re a Tier 1 employee, that is your established cap. Anything you make above that established cap after your CBA expires is not calculated towards your pension. JGG

Correct. I interpreted your question about pipeline as someone who has put in for retirement whether or not the retirement date is beyond the end of the CBA. Provided the contract is in effect on June 1, 2014, salaries earned under it are grandfathered.
COLA changes are not grandfathered for anyone regardless.

“TRS informed me that the cap that is grandfathered in is based on when your school districts CBA expires. For example, say your CBA expires at the end of 2016, if 2016, was your highest salary and you’re a Tier 1 employee, that is your established cap. Anything you make above that established cap after your CBA expires is not calculated towards your pension.”

My CBA expires June, 2014 but I will retire 4 years later. My understanding of your above comments is that I can still receive my 2 years of sick pay but my salary will be capped at this years salary. My compounded 6 percent raise for the next four years will not be included in the new pension law. Bummer, I really counted on the higher salary figure before I put in for retirement. Thanks for your help in understanding these new changes.

Economists use the concept of “present value”: a stream of future benefits is converted into a current-dollar equivalent using a basic economic formula. Public Act 98-599 reduces the expected present value of my pension by about 23%. My pension is now worth less, so I believe PA 98-599 is indeed unconstitutional.

“TRS informed me that the cap that is grandfathered in is based on when your school districts CBA expires. For example, say your CBA expires at the end of 2016, if 2016, was your highest salary and you’re a Tier 1 employee, that is your established cap. Anything you make above that established cap after your CBA expires is not calculated towards your pension.”

My CBA expires June, 2014 but I will retire 4 years later. My understanding of your above comments is that I can still receive my 2 years of sick pay but my salary will be capped at this years salary. My compounded 6 percent raise for the next four years will not be included in the new pension law. Bummer, I really counted on the higher salary figure before I put in for retirement. Thanks for your help in understanding these new changes.

Not sure this is correct. Plus I thought the cap was around $100K plus which would be well over many in downstate IL.

Pensionable Salary Cap for Tier I Members
The legislation would cap a member’s pensionable salary at the Tier II salary cap (currently set at
$110,631). Under existing state law, the salary cap rises annually. The increase is equal to one-half of
the annual rate of inflation.
However, for any member covered by an individual contract or collective bargaining agreement, the cap
will be the member’s annualized salary (if it is higher than the Tier II cap) on the day the current
contract expires. A contract cannot be amended or extended to increase the level of the cap.
For any member not under contract but with a current salary that exceeds the cap, that member’s salary
cap would be set at their salary (if it is higher than the Tier II cap) on the bill’s effective date.

^^^^^^This is part in bill about cap.

I was close to my 100K figure. If you make over the tier II cap then obviously you will be taking a hit. But like I said a large majority of teachers downstate will be well under that figure.

Anonymous makes a very good point. The changes to the money purchase formula in SURS for people retiring after July 1, 2014 are absolutely draconian, and on top of the draconian diminishments via the AAI that will impact most everyone. This formula is quite complex and understood by very few. Apparently the IEA is among those who don’t understand it, because I read through their entire lawsuit and there is no mention of it. I simply do not understand what the SUAA is waiting for - they should have filed suit a month ago.

Andrew, granted the money purchase is an earned benefit and agree it is diminished. My cursory review of the bill indicates it isn’t specifically referenced. If the whole bill is tossed, does it make a difference? Mostly rhetorical question.

I think his point is the diminishment is easier to see under the money purchase option because it occurs immediately in the form of a smaller pension from day one as opposed to the future losses caused by the AAI reduction.

And it was specifically addressed in PA 98-0599. Unless you really knew the ins and outs of the money purchase option (I didn’t them but a SURS person got me to understand it), you didn’t realize the import of the language as enacted.

Just read the whole lawsuit. It has 4 complaints. First is that SB1 violates the Pension Clause of the Illinois Constitution as a clear pension diminishment. Count 2 states that in the alternative, it violates the Contracts clause of the Illinois Constitution as SB1 is an ex post facto law. Count 3 states that SB1 violates the Takings clause of the Illinois Constitution which states that “Private property shall not be taken or damaged for public use without just compensation as provided by law.” In diminishing the benefits of the pension, count 3 states that the reduction in benefits is not justly compensated. Count 4 is similar to count 3 in that it states that the Takings clause of the Illinois Constitution is violated due to the taking of plaintive’s payments into the pension system made by those plaintives for benefits that have, due to SB1, materially changed, without just compensation.

The suit seeks Class Action status for all active, retired, and inactive members of the TRS, SERS and SURS pension systems. It seeks an injunction due to irreparable harm that the law will cause when implemented, and it seeks both court costs and requests what looks like punitive damages stating “such additional relief as is just and equitable”.

That’s my non-legal summary. The lawyers out there can correct this summary as desired.

@Andrew: I too read, or skimmed, the lawsuit and noticed nothing specific about SURS or the Money Purchase Formula. The suit asks for the bill to be thrown out as a whole, and of course if that happens we have the status quo ante. But the Judges might accept some items and not others, and then the change to the MPF interest rate is vulnerable.

I expect that SUAA will file their own suit, or possibly join with one, and that it will mention the MPF specifically. (They’re not rich but they have a legal fund; I gave them money and encourage you to do the same.)

Two questions for anyone better informed than I:
1. Is the change to the Money Purchase Formula (in particular to the rate of interest used in calculating it) separable?
2. Immediately before PA 98-0059 the rate was set by the Comptroller, but I don’t know what constraints or guidelines she acted under. Did she just make it up, or were there instructions on how to find the appropriate rate for a given year? (It was certainly not the long-term investement performance of SURS, or we’d have done a lot better.)

It is clearly a diminishment. The State will say they had no choice. It’s a crisis, like suspending civil liberties in a riot to save lives. As in they had no other option.
Of course they have plenty of other options but they don’t want to do them. But I think that’s their defense.

If the IL SC follows the main body of law on this topic they will overturn SB1. If they allow some form of or type of “crisis/police powers” argument they may try and carv out a few things that they allow or perhaps signal to the parties to negotiate and consider the areas that the SC might consider legal etc. SC ruling may not be the end of the pension issue, but may just usher in the next phase with a bit more direction to its path.